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Success of Crowdfunding Puts Pressure on Entrepreneurs - NYTimes.com

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SuccessofCrowdfundingPutsPressureon Entrepreneurs

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KickstartersboothattheXOXOtechconference.Kickstarterhashelpedabout30,000projectsraisemoney.
ByJENNAWORTHAM Published:September17,2012

PORTLAND,Ore.Anefforttobuildasleekaluminumcharging dockfortheiPhonegeneratedfervoronlinewhenitwasannounced lastDecember.Theprojectscreatorsraisedcloseto$1.5million throughKickstarter,acrowdfundingWebsite,andpromisedtostart shippingtheirElevationDockinApriltothosewhohadbackedthe project.

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TheXOXOtechconferenceended Sunday.Thechallengeof crowdfundingsiteslikeKickstarterwas apopulartopicattheevent.

ButlastweekAppleannounceda redesignediPhonethatisnot compatiblewiththedockand becauseofmanufacturingdelays, someoftheprojectsoriginalbackers werestillwaitingtoreceivetheirs.The designersarenowscramblingtomake anadapterandupdatetheproduct.

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ImjusthopingtogetminebeforetheiPhone6shipsat thispoint,onebackerwroteonKickstarter.

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CrowdfundingsiteslikeKickstarterandIndieGogoarelettingdesignersandothercreative peopleconnectwithaudienceswhowanttofinancetheirdreams,andtheyarebecoming increasinglypopular.Nearlythreemillionpeoplehavehelpedatotalof30,000projects meettheirfundraisinggoalsonKickstarter,thelargestsuchsite,tothetuneof$300 millioninpledges. Butforthecreatorsoftheseprojects,gettingthemoneyissometimestheeasypart.They thenhavetoturntheirdreamsintoreality,withacrowdkeepinganeyeontheirprogress. Thisnewmodelcomeswithahostofpotentialpitfallsthatareoftendifficultforproject creatorstoanticipate,andhardforthearmchairphilanthropistswhobackthemtograsp.

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Success of Crowdfunding Puts Pressure on Entrepreneurs - NYTimes.com

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Backersareessentiallyputtingtheirtrustintheprojectcreators,givingthemcashin returnforthepromiseofafuturereward. Thosewhogiveafewdollarstoamoviemakingprojectmaygettheirnamesinthecredits, whilesomeonewhoputsup$100tosupportdevelopmentofasmartwristwatchmightbe promisedoneofthefinisheditems. Muchofthetimethisworksout.Butsomeprojects,includingseveralprominentandin demandones,haverunintomisstepsandlengthydelays.Thepermitsforanewfoodtruck mightnotcomethrough.OragadgetliketheElevationDockmightbeharderthan expectedtomanufactureandship. TheriseofcrowdfundingcameupoftenovertheweekendhereatthedebutoftheXOXO Festival,aconferencethatfocusedonnewmodelsandoutletsforcreativityonthe Internet.TheconferencewascofoundedbyanearlyKickstarteremployee,AndyBaio, whosold$400ticketsonKickstarteritselftogaugeinterestintheeventandraisemoney forit. Therelationshipbetweencreatorsandbackersoncrowdfundingsitesisstillbeingworked out.Thebackersplaytheroleofphilanthropists,investors,customersorallofthe above.Andwhenpromisedrewardsareslowtomaterialize,eagerbackerscangetcranky. Itsdefinitelyalotofpressure,saidEricMigicovsky,whoseKickstarterprojecttocreatea lineofPebblewristwatcheswithinnovativedisplaysraisedmorethan$10million morethan10timeswhathehadhopedtoget.Thereare65,000peoplewhohave preorderedawatchthatdoesntyetexist. Mr.Migicovskyhiredsomeonetohelpmanagehisinboxnearly9,000peoplehavee mailedhimabouttheprojectandtopostupdates.Heoriginallyhopedtostartshipping thewatchesinSeptember,adatethathehashadtopushback,althoughhedeclinedto saybyhowmuch. AstudybyEthanMollick,aprofessorofmanagementattheWhartonSchoolofthe UniversityofPennsylvania,foundthat75percentofdesignandtechnologyrelated projectsonKickstarter,mostofwhichinvolvephysicalproducts,failedtomeettheir promiseddeadlines.Ingeneral,projectbackersseemtobeunderstandingofhiccupsand willingtowaitaslongastheyarekeptinformed. Thehoneymoonperiodthatweareexperiencingaroundcrowdfundingisbeginningto cometoaclose,saidWilSchroter,cofounderandchiefexecutiveofFundable,a companythatisapplyingcrowdfundingtotheventurecapitalprocess.Peoplerealize thereisrealriskinvolvedininvestinginanythingearlystage,whetheritsanidea,a charityoraproduct,andtheyrestartingtounderstandtheyarentbuyingoffofAmazon. Kickstartersaysitisnotresponsibleformakingsureaprojectiscompletedontime,orat all.Itsaysprojectcreatorsarelegallyobligatedtofulfilltheirpromises,butiftheydonot, Kickstarterhasnomechanismforrefundingthemoneythatwaspledged.Theproject creatorscanrefundthemoneyiftheychoose. Sometimesprojectcreatorscanbeoverwhelmedbythesuccessofacrowdfunding campaign. ThefourcollegestudentsbehindDiaspora,aprojectthataimedtobuildanopen alternativetoFacebook,beganwiththemodestgoalof$10,000.Theyraised$200,000 fromaround6,500people.Butafterthreeyears,theydecidedtostartonanotherventure andturnedthecodeovertoanyonewhomightwanttokeepworkingonit.(Onemember oftheteamcommittedsuicidelastyear.)
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Thisarticlehasbeenrevisedtoreflectthefollowingcorrection: Correction:September18,2012 Anearlierversionofthisarticlemisspelledthesurnameofthecofounderandchief executiveofFundable.HeisWilSchroter,notSchroeter.

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Success of Crowdfunding Puts Pressure on Entrepreneurs - NYTimes.com

AversionofthisarticleappearedinprintonSeptember18,2012,onpageB1oftheNewYorkeditionwiththeheadline: InstantInternetHeroes.
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